The MSCI Asia Pacific index erases 2023 gains amid global stock rout

Asia's leading stock index erased all of its gains for the year on Tuesday as bank stocks continued declines triggered by the collapse of a growing number of US financial establishments.

The MSCI Asia Pacific index fell 2.3%, with Japanese banks among the biggest drags on the market. The index is down more than 9% from this year's high recorded in January, wiping out its gains for the year. The MSCI entered a bull market during the second trading week of the year, reflecting optimism from China's reopening.

The Tokyo Stock Price Index (Topix) fell almost 3%, representing the biggest daily decline in more than five months, while the MSCI ASEAN Index slumped 9.8% from a January high.

Meanwhile, MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.47%, also reaching new lows for the year.

READ MORE: US bank stocks continue to plummet

Asian stocks are reacting "to growing risks of a US recession happening earlier than previously expected," head of Asia equity strategy at Societe Generale Frank Benzimra said, adding that "cyclical markets such as Korea, Japan, and cyclical sectors and small caps tend to be more impacted in this context."

Bank stocks in Japan fell sharply on Tuesday with Tokyo-listed shares of Mitsubishi UFJ Financial Group facing an 8.59% decline. Sumitomo Mitsui Financial Group shed 7.57%, Mizuho Financial Group dropped 7.14% and tech-focused giant SoftBank Group lost more than 4%.

"Concerns of a global economic rout continue to put pressure on the region, which are more value-focused," IG analyst Yeap Jun Rong wrote in a note on Tuesday.

Investors continued to unload bank stocks on fears of a spillover effect from the collapse of three US lenders, even after regulators announced emergency measures to protect depositors.

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